Can the electronics supply chain learn a lesson from the apparel industry? When it comes to RFID tagging, the evidence suggests it can.
As in electronics, US and European apparel imports have been rising over the past few decades. To cater to this ever-increasing demand in a cost-effective manner, manufacturers have shifted their production from the industrialized countries to the developing ones. The shift in production has brought new challenges at every link in the apparel supply chain, including manufacturing.
Manufacturers in the developing countries are losing business because of improper inventory management, poor shipping information to clients (based on pallet-level accuracy), and, most importantly, leakages in the manufacturing process.
Under these circumstances, RFID-based item-level tagging would solve a lot of problems for manufacturers. Since RFID is one of the most promising emerging tools, manufacturers can deploy RFID technology to track products throughout the supply chain and hence improve their overall business processes. Some of the numerous benefits of item-level tagging include the following:
- Improved raw material forecasting: With item level tracking, manufacturers are able to manage raw materials more efficiently based on first-in-first-out (FIFO) material data and product availability. This way they are able to get a comprehensive understanding of the raw materials and can make more accurate demand forecasts to distributors. As a result, they reduce the inventory holding and labor costs.
- Enhanced shipping verification: Item-level RFID tagging provides accurate information to the distributors about the products, compared to the cases and pallet-level information. It also provides an electronic proof of delivery; hence, item-level confirmations can be received from distributors, which reduces shortage disputes and save costs.
- Real-time accountability of work-in-progress (WIP): Through proper integration with enterprise systems, manufacturers can monitor work-in-progress in real-time and ensure that the right combination of raw materials is being used to produce the products. Accurate information of products at the shop floor enables correct disbursement of production incentives; as a result, overall labor costs can be reduced.
- Authenticity control: Counterfeit fashion is one of the primary causes of concern in the apparel business. With designers losing more than $10 billion annually to counterfeit products, RFID tracking proves to be a viable solution. Through RFID tracking, high-level authenticity checks can be set up for individual products, which protects brand reputations.
The technology industry can benefit from increased sales of RFID products. According to a research report, item-level tagging will represent about 40 percent to 45 percent of total RFID revenues in the coming years. The business will rise from about $250 million in 2008 to $8.3 billion in 2018 (i.e., from 5 percent to 30 percent of the total RFID market). Consequently, the usage of these tags in different industries will increase.
Keeping in mind the torrid growth in the RFID market and the advantages of item-level tagging, as reported by many retailers including Macy's, there can be many scenarios where item-level tagging can be effectively used. (Retailers have achieved inventory accuracy of up to 97 percent, which is significantly higher than the industry average of 65 percent.) Effective uses include consumer electronics (especially high-end and unique gadgets), archiving, military equipment, libraries, and automated assembly lines, where machines can automatically recognize and bind components together.
Do you think that the electronics supply chain industry should adapt to RFID-based item-level tagging? Are the benefits worth it? And will there be any barriers to implementation?